Emerging oil and gas exploration and production company, Eon NRG Limited (ASX: E2E) has a mix of exploration and producing assets, which is providing a strong impetus to the growth potential of the company. The company is currently in the process of drilling its first Powder River Basin (PRB) well, the Govt Kaehne 9-29 well.
Story of the Govt Kaehne #9-29 Well
Considered to be a low-risk conventional well, the Govt Kaehne #9-29 based in Wyoming is the first well drilled within Eon’s 15,000-acre Powder River Basin (PRB) lease holding.
The PRB region has a proven history of oil and gas production from multi-stacked pay zones with several oilfield contractors for drilling and other services. Besides, Wyoming state is considered as an oil and gas-friendly state. In addition, the company also owns Borie Oilfield and Silvertip field in Wyoming.
Last year in September, Eon NRG acquired around 15,000 acres of PRB leases from the United States Department of Interior with ten-year lease terms; and in less than a year time, the company has made significant progress in the development of these leases.
After spending considerable time in identifying potential drill prospects in its PRB acreage, targeting oil from multiple formations including the Turner, Dakota, Minnelusa and Muddy, the company announced the commencement of the permitting of its first PRB well in March 2019. In the process, the company also identified multiple other drilling targets in the lease acreage, which it believed would aid in building a pipeline for drilling opportunities beyond 2019.
The well is targeting the production of light sweet crude oil from the Sandstone reservoirs of the Dakota formation and will also penetrate the Muddy Formation as a secondary target at a depth of ~6,000’.
In the second quarter of 2019, Eon NRG filed the application for drilling permits for the Govt Kaehne #9-29 well. As a precursor to filing the permitting application, the company conducted substantial environmental, archaeological, and wildlife assessments. During the second quarter, tenders were sought from various contractors for civil works, equipment supply and drilling and after careful analyses, Eon NRG chose CapStar as the drilling contractor of the well using their Rig #312, which has an exceptional safety and performance history.
Recently in July 2019, the State and Federal authorities granted drilling approval for the Govt Kaehne #9-29 well, following which, the earthworks were commenced at the well location.
Eon NRG’s confidence in the Govt Kaehne #9-29 well
- Offset wells have good initial production rates (IP’s) and estimated ultimate recovery (EUR);
- Strong water drive which results in higher recovery and lower production decline rates;
- 100% working interest and 87.5% net revenue interest;
- Well is located in a structurally high position in a reservoir that is oil rich with 30-40’ of pay expected in the Dakota Formation;
- Directionally drilling the well to intersect the targeted pay;
- Close to service town (Gillette) and good access for transportation of the oil from storage;
- Potential to add significantly to the Company’s existing 530 boepd production.
In the month of March 2019, the company completed a capital raising, providing working capital to support the drilling of the first Powder River Basin well. As per Eon founder Mr. Mark Stowell, continued tight cost control to maximise funds for drilling and growth opportunities continues to remain a key mandate for management.
June Quarter Activities
For the June quarter, the company reported a total gross production of 43,471 barrels of Oil equivalent (BOE) which included 17,318 Barrels of Oil production, 3,801 barrels of NGL production and 22,352 BOE of Gas production.
During the quarter, E2E sold 13,675 barrels of Oil and earned revenue of US$796,833. Besides, the company sold 55,649 MCF of Gas during the quarter and earned a revenue of US$126,543. The company earned NGL Revenue of US$52,687 by selling 3,109 barrels of NGL.
In total, the company sold 26,058 Barrels of Oil Equivalent during the quarter, generating a net sales revenue of US$976,063, higher than the sales revenue of US$943,238 earned in March 2019 quarter.
During the June quarter, the company used net cash of around US$368k for operating activities, US$27k for investing activities and for US$20k for financing activities. As at 30th June 2019, the company had cash and cash equivalent of US$2.29 million. In the September quarter, the company expects to incur a net cash outflow of around US$1.19 million with US$1.04 million on exploration and evaluation.
Recent Board and Management Changes
In May 2019, following the retirement of Mr. Mark Stowell from the role of Chairman, Eon NRG appointed Mr. Matthew McCann as Chairman of the Board. Mr. McCann has been a member of the board over 5 years and brings in deep knowledge and corporate expertise in the US oil and gas industry. He has 24 years in the sector in various roles including Senior Vice President, CEO, Corporate Secretary and General Counsel of both private and public listed (NYSE and TSX) companies.
In June 2019, Eon appointed Mr. Simon Adams (CFO) as an Executive Director. Mr. Simon has more than 25 years’ experience of working with private and public companies with a strong strategy and governance skills. In May 2013, Mr. Simon was appointed for the role of Chief Financial Officer (CFO), making him an important member of the management team. Along with finance and corporate experience, Mr. Simon has enormous experience across a range of industries including upstream oil and gas, mining and aquaculture.
Eon’s current Board and management team constitutes well-seasoned industry veterans, which includes:
- Matt McCann (Chairman) – Directly involved in raising more than $2.5 Billion in capital;
- John Whisler (MD/CEO) – 30 years of diverse and extensive experience in the US oil and gas sector;
- Gerry McGann (Technical Director)- More than 40 years’ experience in the upstream oil and gas industry.
Stock Performance: E2E’s stock was trading at a price of $0.005 with a market capitalisation of circa A$3.85 million by the close of trading on 22 August 2019.
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